TOKYO, May 29 (Reuters) - Japanese government bond (JGB) yields rose on Wednesday to fresh multi-year highs as investors remained cautious amid uncertainty about the Bank of Japan's (BOJ) monetary policy outlook.
BOJ board member Seiji Adachi hinted on Wednesday that the central bank may hike rates if excessive yen weakness has a large impact on inflation. The yen, meanwhile, touched a four-week low earlier in Asian trading. "The weak yen heightens expectations for BOJ policy adjustments," with many investors expecting another rate hike as soon as July, said Katsutoshi Inadome, a senior strategist at Sumitomo Mitsui Trust Asset Management.
The 10-year JGB yield rose 4 basis points (bps) to 1.075%, its highest since December 2011.
The two-year JGB yield, which tends to be more sensitive to monetary policy expectations, rose 3 bps to a fresh 15-year high of 0.375%.
JGB yields have climbed to their highest in over a decade in recent weeks after the BOJ unexpectedly reduced offer amounts at a bond-buying operation on May 13, a move some market players believe was aimed at slowing the yen's decline.
The cut has generated uncertainty about future operations, pushing up yields as investors await more clarity, said Inadome.
"Why did the BOJ cut, what will it do from now on? Those points are unclear, so I think we're in a situation where investors can't really buy on the dip."
The BOJ's Adachi said the reduction had no policy implication, adding that it was too early to determine whether recent rises in Japanese long-term yields would be sustained.
JGB yields also got a boost from their U.S. peers, which rose to multi-week highs in overnight trading.
The five-year yield jumped to as high as 0.635%, a level last seen in November 2009.
The 20-year JGB yield touched its highest since July 2011 at 1.890%, and the 30-year JGB yield hit a 13-year peak of 2.225%. (Reporting by Brigid Riley; Editing by Mrigank Dhaniwala)
